Hedge Funds Nibbling On Standard Diversified Inc. (SDI)

In this article we will check out the progression of hedge fund sentiment towards Standard Diversified Inc. (NYSE:SDI) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Standard Diversified Inc. (NYSE:SDI) the right pick for your portfolio? Money managers are taking an optimistic view. The number of long hedge fund positions inched up by 1 lately. Our calculations also showed that SDI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most investors, hedge funds are viewed as worthless, outdated investment tools of the past. While there are over 8000 funds trading at the moment, We choose to focus on the aristocrats of this club, approximately 850 funds. These money managers manage the lion’s share of all hedge funds’ total asset base, and by observing their first-class equity investments, Insider Monkey has deciphered numerous investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Israel Englander of Millennium Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to analyze the new hedge fund action surrounding Standard Diversified Inc. (NYSE:SDI).

What have hedge funds been doing with Standard Diversified Inc. (NYSE:SDI)?

At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. By comparison, 3 hedge funds held shares or bullish call options in SDI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Standard Diversified Inc. (NYSE:SDI) was held by Sabrepoint Capital, which reported holding $6.1 million worth of stock at the end of September. It was followed by Saba Capital with a $0.5 million position. Other investors bullish on the company included Millennium Management, Athanor Capital, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Sabrepoint Capital allocated the biggest weight to Standard Diversified Inc. (NYSE:SDI), around 2.46% of its 13F portfolio. Saba Capital is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to SDI.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Standard Diversified Inc. (NYSE:SDI) headfirst. Millennium Management, managed by Israel Englander, established the biggest position in Standard Diversified Inc. (NYSE:SDI). Millennium Management had $0.2 million invested in the company at the end of the quarter.

Let’s now review hedge fund activity in other stocks similar to Standard Diversified Inc. (NYSE:SDI). These stocks are Business First Bancshares, Inc. (NASDAQ:BFST), Gold Resource Corporation (NYSE:GORO), Donnelley Financial Solutions, Inc. (NYSE:DFIN), and CapStar Financial Holdings, Inc. (NASDAQ:CSTR). This group of stocks’ market values match SDI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BFST 4 8748 1
GORO 6 3215 1
DFIN 18 27554 -4
CSTR 10 7454 5
Average 9.5 11743 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $7 million in SDI’s case. Donnelley Financial Solutions, Inc. (NYSE:DFIN) is the most popular stock in this table. On the other hand Business First Bancshares, Inc. (NASDAQ:BFST) is the least popular one with only 4 bullish hedge fund positions. Standard Diversified Inc. (NYSE:SDI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately SDI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SDI investors were disappointed as the stock returned 17.8% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.